U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[x]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JULY 31, 1998

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                           Commission File No. 0-13078

                       LEADVILLE MINING AND MILLING CORP.
                 (Name of Small business issuer in its charter)


      State of Nevada                                            13-31805030
(State or other jurisdiction of                               (I.R.S. Employer
Incorporation or organization)                               Identification No.)

      76 Beaver Street
      New York, New York                                             10005
    (Address of principal                                          (Zip Code)
      executive offices)

Issuer's telephone number: (212) 344-2785

Securities registered under Section 12(b) of the Exchange Act:  none
Securities registered under Section 12(g) of the Exchange Act: Common Stock, 
par value $.001 per share

Check mark whether the issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days. 

YES [X] NO [ ]

Check if there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulations S-B contained in this form, and no disclosure will be contained,  to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year.  $ 1,377

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  computed by  reference  to the  average  between the closing bid
($.47) and asked ($ 50) price of the  issuer's  Common  Stock as of October  26,
1998 was  $1,055,315,  based upon the average  between the closing bid and asked
price ($ 0.485) multiplied by the 14,547,041 shares of the issuer's Common Stock
held by non-affiliates as of October 28, 1998. (In computing this number, issuer
has  assumed  all  holders  of  greater  than 5% of the  common  equity  and all
directors and officers are affiliates of the issuer.)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of October 28, 1998: 17,476,796

                DOCUMENTS INCORPORATED BY REFERENCE See Item 13.

         Transitional Small Business Disclosure Format: Yes [ ] No [ X ]


<PAGE>




                       LEADVILLE MINING AND MILLING CORP.

                                   Form 10-KSB

PART I              Table of Contents                                      Page
------              -----------------                                      ----
Glossary                                                                   (iii)
Item 1.             Description of Business                                    1

Item 2.             Description of Properties                                  2

Item 3.             Legal Proceedings                                         10

Item 4.             Submission of Matters to a Vote of                        10
                    Security Holders
Part II

Item 5.             Market for Company's Common                               10
                    Equity and Related Stockholder Matters

Item 6.             Management's Discussion and Analysis of                   11
                    Financial Condition and Results of Operations

Item 7.             Financial Statements                                      12

Item 8.             Changes in and Disagreement with Accountants              15
                    on Accounting and Financial Disclosure

Part III

Item 9.             Directors, Executive Officers, Promoters                  15
                    and Control Persons; Compliance with
                    Section 16(a) of the Exchange Act.

Item 10.            Executive Compensation                                    17

Item 11.            Security Ownership of Certain Beneficial                  18
                    Owners and Management

Item 12.            Certain Relationships and Related Transactions            19

Item 13.            Exhibits and Reports on Form 8-K                          20

Signatures                                                                    21
Supplemental Information
Financial Statements                                                         F-1


                                       ii

<PAGE>



                           GLOSSARY OF TECHNICAL TERMS

Backfilling:               Putting waste rock in an open stope.

Ball Mill:                 Instrument which reduces rock to powder form.

Blanket Ore:               Ore,  which usually lies  horizontal in the form of a
                           sedimentary bed.

Brecchia Pipe:             A funnel of  broken  rock  descending  into the earth
                           (along  a  fault  line)  through  which  mineralizing
                           solutions  may  rise.  

Contact Metamorphic 
Type of Deposit:           Where   minerals   result   from  ion   exchange   or
                           replacement  between an intrusive  igneous rock and a
                           host rock.

CuSO(4):                   Copper Sulfate.

Feeder Veins:              Small veins.

Floatation Plant:          Mechanical  system that separates  valuable  minerals
                           from rock powder using chemical solutions.

Gravity Plant:             Mechanical  system that separates  valuable  minerals
                           from  rock  powder  using the  force of  gravity  for
                           separation.

Hydrometallurgical
Plant:                     A smelter that reduces sulfide faults converging from
                           different directions.

Leadville Dolomite:        Name  of  a  specific  limestone  bed  in  Leadville,
                           Colorado.

Leadville Silver
Gold Process:              Generally  similar  to  the  Sherrit  Gordon  process
                           whereby  chemicals  are used to  produce  oxides  and
                           sulfates of zinc.

Lode Claim:                Claim on which  mineral is found  underground;  i.e.,
                           vein.

Magnetic Anomaly:          A variation in the earth's magnetic field.

Magnetite Skarn:           The mineral  magnetite  (iron  Oxide) in  combination
                           with quartz emplaced in limestone.

Major
Intrusive Center:          An area where large  funnels  exist and through which
                           large amounts of mineralizing fluids rose.

Massive
Polymetallic Ores:         Large  dense  mass  of  sulfide  minerals  containing
                           several metals.

MNSO(4):                   Manganese Sulfate.


                                     (iii)

<PAGE>


Mineral Deposit or
Mineralized Material:      A  mineralized   underground   body  which  has  been
                           intersected by sufficient  closely spaced drill holes
                           and or  underground  sampling  to support  sufficient
                           tonnage  and  average  grade of  metal(s)  to warrant
                           further  exploration-development  work.  This deposit
                           does not qualify as a  commercially  minable ore body
                           (Reserves), as prescribed under Commission standards,
                           until a final and comprehensive  economic,  technical
                           and  legal  feasibility  study  based  upon  the test
                           results is concluded.

Open Stope:                A mined area that remains as an open space.

OPT:                       Ounces per ton.

Patented Claim:            Privately owned mineral land.

PbSO(4):                   Lead Sulfate.

Place Claim:               Claim on which  minerals are found in sand and gravel
                           - on surface.

Positive Ore:              Ore that is proven (same as proven).

Probable Ore:              Inferred ore. Ore which is believed to exist, but not
                           fully proven.

Proven Ore:                Minerals that are determined to be recoverable.

Replacement
Ore Body:                  Mineral ore,  irregular in form, which is emplaced in
                           limestone.

Rhyolite                     
Agglomerate:               An igneous rock  (rhyolite)  which has been fractured
                           (crushed) and recemented.

Sherrit                      
Gordon Process:            Hydrometallurgical  method of  processing  (smelting)
                           zinc concentrates into oxides and sulfates.

Shockwork Breccia:         Earth's  crust broken by two or more sets of parallel
                           faults converging from different directions.

Silica Stope:              Name of a mine location in the Hopemore mine.

Square Setting:            A system of timbering a tunnel or opening underground
                           to prevent cave-in.

Stockwork:                 Ore,  when not in  strata  or in  veins  but in large
                           masses,  so as to be worked in  chambers  or in large
                           blocks.

Unpatented Claim:          Mineral land owned by the  government  and rented for
                           an annual fee.

ZNSO(4):                   Zinc Sulfate.


                                       iv
<PAGE>


                                     PART I



Item 1.  Description of Business

Leadville Mining and Milling Corp. (the "Company") was incorporated in the state
of Nevada in February 1982.  The Company owns rights to property  located in the
California  Mining  District,  Lake County,  Colorado and plans to engage in the
business of mining and milling gold and other minerals from its  properties.  At
present, there is no assurance that a commercially viable ore body exists in any
of the Company's  properties until further  systematic  underground  sampling or
core drilling is done, and a final  feasibility  study based upon the results is
concluded.  The future of the Company is dependent upon the Company's properties
producing  gold,  silver,  lead and zinc in  sufficient  quantities  so that the
Company will be a commercially viable entity. A description of the mining claims
owned by the Company is contained in "Item 2. Description of Properties."

During the past year,  the Company  completed  the Hopemore to Hunter Tunnel and
commenced the connecting raise between the 7th and 5th levels.

At this time,  assuming that the Company is able to obtain adequate funding (see
"Part II, Item 6.  Management's  Discussion and Analysis of Financial  Condition
and  Results  of  Operations-  Liquidity  and  Capital  Resources"),  management
believes  that the  Company's  Hopemore-Comstock,  Hunter and Penn Groups may be
explored with positive results.  If ore is discovered in sufficient  quantity it
could be  processed  at the  Company's  custom mill which is prepared to process
ores at a rate of 180 tons per day;  expandable to 300 tons per day as required;
or at the  ASARCO  Black  Cloud  Mill by  agreement  (the  "ASARCO  Agreement").
Management has signed an agreement  whereby ASARCO  Incorporated  ("ASARCO") may
perform  milling at ASARCO's  Black Cloud Unit. All activity at the mine or mill
would be performed by persons employed by the Company.  Since September 1, 1997,
the ASARCO Agreement,  by its terms, is terminable by either party upon 60 day's
written  notice.  Notwithstanding  the  foregoing,  the  Agreement  shall not be
extended beyond June 30, 2000. See "Part II, Item 6. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity  and Capital
Resources."

In the event that  sufficient ore is discovered and processed,  concentrates  of
metallic  minerals  containing gold (AU),  silver (AG), Lead (PB), zinc (ZN) and
copper (CU) would be processed  (smeltered) at ASARCO's  smelter in East Helena,
Montana or, other possible smelters in the United States or Canada.



                                       1
<PAGE>


The Mine Safety Health  Administration  requires that all underground mines have
at least two shafts that communicate  with mine operating  areas.  During fiscal
1997,  the second  exit,  Hunter  shaft was  completed.  The  Company  commenced
exploration of potential mineral horizons on the 7 level, including gold-bearing
minerals in the "B-Zone" and other locations associated with the #4 vein. During
the period of 1997 and 1998,  long-hole drilling at the B-Zone location resulted
in the  discovery  of an area  of  mineralization.  The  minerals  located  were
discovered  in the lower part of the  Parting  Quartzite,  in its shaly  member.
Management  believes  that  based on the  initial  long hole  drilling  results,
mineralization  extends  upward,  into the Dyer  dolomite and downward  into the
Manitou dolomite.  Long hole drilling resulted in a preliminary average grade of
1.29 oz. gold per ton in a limited portion of the mineralized zone.

In the event that ore is discovered in sufficient quantity, it is estimated that
the cost to establish a viable mining and milling operation capable of up to 180
tons per day on a continuous  and long term basis,  will  require  approximately
$1,002,000 in capital.  These funds would be applied towards mining and milling,
in  addition  to the  continued  exploration  of the B-zone  and other  suitable
locations.  There can be no assurance  that  sufficient  ore will be discovered,
that extraction will be economically  feasible or that additional funding can be
obtained,  if  necessary  (see "Part II,  Item 6.  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations).

Competition

While  there  is  intense  competition  in  the  acquisition  of  viable  mining
properties,  the Company  already has the properties  that it intends to explore
and is not  currently  involved  in further  property  acquisition.  The Company
believes  that  there  is  no  material  competition  in  the  sale  of  mineral
concentrates  because  the  prices  for  mineral  concentrates  are  based  upon
standards established by the commodity exchange (London Metals Exchange market).

Employees

As of July 31, 1998,  the Company has 10 full time  employees,  consisting  of 2
executive officers, 7 mine laborers and 1 administrative personnel.



                                       2
<PAGE>

Item 2.  Description of Properties

The  Company  owns the  following  mining  claims,  all of which are  located in
California Mining District, Lake County, Colorado.

                                 Patented Claims

                                                          Type of     Percent Of
Name                       Claim No.        Acreage       Claim       Ownership
----                       ---------        -------       -----       ---------
Belle Placer               02778            120.860       Placer         62.5
Pueblo                     12718             36.534       Lode           75.0
Chicago                    01295             10.020       Lode           50.0
New York                   01294             10.140       Lode           50.0
Mikado                     08015              9.250       Lode          100.0
Little Bertha              00504              8.380       Lode            3/8
Free America #2            01177              4.210       Lode            3/4
Emma                       00756              8.270       Lode            3/8
Colman                     09747              1.446       Lode          44/50
Little Galesburg           01176              6.000       Lode            1/8
Highland Chief             00429              2.097       Lode          100.0
Robert Burns               00538              9.859       Lode          100.0
Highland Mary              00539              6.600       Lode          100.0
President                  08942              6.900       Lode           1/16
J.G. Fraction              13251              1.727       Lode          31/96
Ballard                    00589              3.190       Lode         23/144

                                Unpatented Claims

                           Book/                          Type        Percent Of
Name                       Page No.          Acreage      Of Claim    Ownership
----                       --------          -------      --------    ---------
Columbine                  437/180            7.310       Lode          100.0
Judy                       437/181           17.990       Lode          100.0
New Comstock #1            433/191           20.661       Lode          100.0
New Comstock #2            433/191           20.661       Lode          100.0


The Company  additionally owns 20.73 acres located in the same area, namely, the
California  Mining  District,  Lake County,  Colorado on which its mill site for
processing of ore is located.

The Company owns the foregoing  claims as indicated.  The Company has not formed
any partnership  regarding these claims, nor are there any associations  whereby
profits or expenses are to be shared.  The claims are located  approximately 2.5
miles northeast of the town of Leadville, Colorado by County Road. The principal
acreage  forms a  contiguous  group and is  located on a  prominent  topographic
feature known as Breece Hill. See below.



                                       3
<PAGE>

The mill is a 180-ton per day flotation/gravity plant. The Company has purchased
an  additional  ball mill of 120 tons per day capacity  that is at the mill site
and ready to be installed.  The plant would have total  capacity of 300 tons per
day when the second mill has been put into place.

The plant is  situated  on a 20.73  acre mill site and has an  approved  tailing
disposal location.  The plant has been pilot tested and is ready for production.
All necessary permits to operate have been granted and are current.

Construction  of the mill began in 1987 and was  completed in August of 1989. It
was the  Company's  intent  to do fee  milling  for  other  companies  while the
federally  mandated  construction  of the  mine  second  exit  was in  progress.
However,  the  recession  in the mining  industry,  which the Company  could not
predict,  and the  resulting  lower  metal  prices  essentially  eliminated  the
possibility  of custom  milling.  The mill is on a  stand-by  basis and has been
since its  completion.  The  Company  has  discussed  custom  milling  with many
potential  shippers of ore, but  transportation  costs from any mines not in the
Leadville District have proved to be prohibitive.  The Company  anticipates that
the mill will be able to process  both  sulfide and oxide  minerals.  The ASARCO
mill will process  sulfide  minerals only.  (See "Part II, Item 6.  Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations-Liquidity  and Capital Resources").  The ASARCO agreement is still in
effect.  Should it terminate,  the Company believes that its own mill can handle
all types of minerals mined.

The  Company has  employed a man with mill  experience  whose  duties will be to
operate  the  Company's   reduction   plant.  The  initial  mill  feed  will  be
development-grade, gold bearing material from the B-Zone location. As the B-Zone
is further evaluated,  and if results are favorable,  commercial  high-grade ore
from  that  location  will be  processed  exclusively.  The mill  has  processed
approximately 600 tons of material from old tailing piles and recovered 20 to 30
ounces of gold,  with unknown  amounts of silver and lead. The mill is presently
in a condition  whereby it can  efficiently  recover gold;  silver and lead from
newly mined ore.

History Hopemore Mine

The Leadville  mining district is located 100 miles west of Denver,  Colorado in
the heart of the Rocky  Mountains.  The  weather is harsh with long  winters and
short summers.

The  Company's  properties  are  within  the  high  gold  zone of the  Leadville
district,  which was  dominated by the Ibex Mines on Breece Hill.  The high gold
zone has produced  approximately  3 million ounces of gold. The average grade of
ore from the  Hopemore  area is not known.  On  adjacent  properties  a weighted
average of  siliceous  precious  metal ore  shipments  from the Garbutt Lode and
South Ibex Stockwork between 1913 and 1922 is 0.850 OPT Au, and 4.97 OPT Ag from
63,796 tons.

Historically, the Company's properties were worked as two separate mining areas,
the Hopemore  shaft in the Ibex area and the Penn Group area further  west;  and
the ores were not  concentrated  by milling  but were  shipped  directly  to the
Arkansas Valley Smelter in Leadville.



                                       4
<PAGE>

Work by the Company  started in 1984 with  acquisition of the Comstock  Hopemore
Group of claims.  Retimbering  of the entire  Hopemore shaft followed along with
establishment of the new 7th level, partial  rehabilitation of the other levels,
several raises, the 5th level connection with the Hunter shaft,  construction of
a mill and the present retimbering of the Hunter escape shaft.

The  Hopemore  shaft was  worked as part of the Ibex mines  until  approximately
1902. The Hopemore shaft was sunk in 1907 to reach the 7th level of the Ibex No.
4 mine. Large replacement ore bodies in the Leadville  dolomite (Blue limestone)
lie on the  hanging  wall side  (southwest)  of the Ibex No. 4 vein.  The ore is
associated  with a large  magnetite  skarn  replacement  body  in the  Leadville
dolomite.  The Leadville  dolomite on the footwall (east) side of the Ibex No. 4
vein was mined via the Hunter Shaft.

Ground conditions in the district generally do not allow open stopes, therefore,
square  setting  and  backfilling  with  waste  of  low-grade  ore was  commonly
practiced.  When the large ore bodies of the Hopemore  were mined,  zinc sulfide
ore was of no value. High zinc ore was penalized at the local lead smelter,  and
it is  believed  that  much  of the  backfill  may  be  high-grade  (+12%)  zinc
mineralization.

Mineralized Material

Tons         Au in OPT       Ag in OPT     %PB       %ZN        %Cu 
----         ---------       ---------     ---       ---        --- 

121,200        0.178           8.63        3.98      12.2       0.35
* 5,000        1.29            7.00

[Donald  Wilson,  August 14, 1989,  report on Properties  of Leadville  Mining &
Milling  Corp.  Donald  Wilson,  February  1994,  Ore Reserves on  Properties of
Leadville Mining & Milling Corp. Mr. Wilson is the President of the Company.]

*    By exploratory drilling, 1977, 1988

                                     GEOLOGY

                               Exploration Targets

Hopemore Mine Exploration Target

The Hopemore area has been mined from the Ibex No. 7 level. The lower host rocks
of the  Manitou and Dyer  formations  are  thought to remain  unexplored.  Steep
sulfide  veins  commonly  control the  mineralized  zones.  Four veins have been
identified  which  could feed  replacement  mineral  bodies in these  underlying
formations.  The potential  mineral bodies are massive sulfide and could contain
between  25,000 to 80,000  tons each of  mineralized  material.  [Scott  Hazlitt
Geological Report, Leadville Mining & Milling Properties, January 1993, Page 7].



                                       5
<PAGE>

The  Company's  holdings in the Hopemore area are in a location that should have
good ground preparation for vein deposits. Vein mineralization is not limited to
specific host rocks and may form minable bodies of mineralization.  The veins in
the gold belt of the  Leadville  district are  generally  low in base metals and
higher  in  quartz  and  precious  metals.  [Scott  Hazlitt  Geological  Report,
Leadville  Mining & Milling  Properties,  January  1993,  Page 7]. The  expected
tonnage  from  veins  would be 5,000 to  25,000  tons of  mineralized  material.
[Emmons, et. al., 1927.Fig.98, 99]

Penn Group Explorations Targets

The  targets  in the Penn  Group  area,  west of the  Hopemore,  are  gold  rich
magnetite  skarns,  massive  sulfide  replacement  deposits below or west or the
magnetite and vein deposits. The near surface gold rich magnetite skarn could be
over one million tons of mineralized material. [Scott Hazlitt Geological Report,
Leadville  Mining & Milling  Properties,  January 1993.  Emmons,  et.al.  (P104,
1927)] The deeper  massive  sulfide target could be in the range of one to +four
million  tons of  mineralized  material.  Vein type  deposits;  high in precious
metals are also a possibility under the magnetite deposits. The expected tonnage
from veins would be 5,000 to 25,000+ tons of mineralized  material.  [Thompson's
Magnetic  Anomaly Map (1990),  Johansing,  Plate 1,  Magnetic  Anamoly,  Emmons,
et.al. (P104, 1927)]

The Penn  Group  including  the area to the  southwest  has not been  thoroughly
prospected.  The  Magnetic  anomaly  map (1990) of the Breece  Hill area shows a
large zone with an anomalously high magnetic signature which management believes
to be a large body of magnetite skarn. Although the magnetite skarn is a contact
metamorphic type of deposit it is usually found near sulfide mineralization.

In the adjacent mine, massive sulfide replacement bodies are often found next to
bodies of  rhyolite  agglomerate,  which is also  known  locally  as  Fragmental
Porphyry.  The  Fragmental  Porphyry is thought to form breccia  pipes that were
formed during the late stages of mineralization and were reamed out centrally to
form mineralizing  conduits. In numerous cases, magnetite is found peripheral to
the massive  sulfide  deposits.  Pyrite veins in the magnetite  often carry high
gold contents. Within the Leadville Mining District northeast trending veins are
generally the best feeders for the massive sulfide blanket  deposits.  The White
Prince  Vein,  which is mapped  north of the Penn Group  property,  is northeast
trending and on Johnasing's maps is correlated with the Pilot Fault.

The target zone would be either between the magnetite skarn and the breccia pipe
or under the magnetite skarn. Magnetite skarn cappings to massive sulfide bodies
are common in the general vicinity of the Comstock shaft.

Penn Group Mines

The Penn Group lies northwest of the Hopemore and contains  magnetite  skarn and
underlying sulfide minerals hosted by the Leadville dolomite.  Magnetite ore was
mined from shallow open cuts and was shipped as smelter flux.  The ores produced
from  underground  workings  contained  a high  gold  and  silver  content.  The
underground  workings  went to depths of 450 to 600 feet and focused on "Feeder"
veins and blanket ore in the lower Leadville formation.



                                       6
<PAGE>

Mineralization  was mined along and to the east of the White Prince  fault.  The
area west of the White Prince fault is down thrown and was prospected but not to
sufficient depths to locate the favorable carbonate section.

Geology and Potential Reserves

The ore  deposits in the  Leadville  district  include  precious  and base metal
massive  sulfide veins and carbonate  hosted  deposits,  gold bearing  magnetite
skarns,  and gold rich veins. The major ore bodies are hosted in Paleozoic aged,
shelf carbonate rocks with a total thickness of 600 feet.

These  sedimentary  rocks have been  intruded by a series of sills and dikes and
faulted,  resulting in complex geology.  The Company's properties are located on
Breece Hill, which is a major intrusive  center,  and contain both gold,  silver
and base metal minerals.

Mineralized Material

Tons         Au in OPT    Ag in OPT     %PB        %ZN     %Cu 
----         ---------    ---------     ---        ---     --- 

121,200        0.178        8.63        3.98       12.2    0.35
  5,000        1.290        7.00
-------
126,200

80,000 tons of this total is based upon  representations  by Hopemore Mining Co.
at cessation of mining activities in 1913. Another 30,000 tons is represented by
the 640 "Zinc Stope" which is accessed by the 740 service raise and is above the
Hopemore 6th level (old Ibex 7th level).  5,000 tons are assigned to the B-Zone.
Other  quantities  of unknown  size are  assigned to seven other areas for which
dimensions are unknown.

The B-Zone bedded  structure which, is of unknown size and situated in the shale
member of the Parting  Quartzite  and  believed to exist in the Manitou and Dyer
limestones assayed, 1.29 ounces of gold and 7.00 ounces of silver per ton over a
length of 35 feet.  The thickness of the shale bed measured 17 feet.  [Donald L.
Wilson,  Report on the Properties of Leadville Mining & Milling Corp. August 14,
1989 P. 25. Scott Hazlitt,  Evaluation of the  Properties of Leadville  Mining &
Milling.  Mr.  Wilson is the President of the Company;  and the initial  results
from the 1997 long hole-drilling Program.]

                        Location of Mineralized Material

   Tons  Area                  Au         Ag        Pb        Zn     Cu 
   ----  ----                  --         --        --        --     -- 
             #4 Vein 7 level

    300  N 1/2 Block 428      0.14        8.4      2.65      4.40    0.55
    300  S 1/2 Block 428      0.40       16.0
    600  S 1/2 Block 441      0.11        9.2      1.95      7.90    1.30


                                       7
<PAGE>

             #4 Vein 6 level

    100  N 1/2 Block 428      0.78      45.90      2.40      4.10    0.70
    400  N 1/2 Block 428      0.16      13.20      2.10      4.70    0.35

             #4 Vein (North Split)

    600  N 1/2 Block 428      0.15      15.10      2.35      3.30    0.40
    200  N 1/2 Block 428      0.36      23.70      2.10      4.10    0.46

             7 level "B" Zone

      6  640 Stope Area

 17,325  Blocks 440,
                441           0.092      5.80      3.95     16.20    0.40

             7 level

  3,200  Block 475            0.11       9.70      4.25     16.00    0.35

             6 level

    500  Block 475            0.26       4.30      2.50      6.00    0.30


             #4 Vein 5 level

    300  S 1/2 Block 430 and
             N 1/2 Block
               441            0.07       9.10      1.55      2.90    6.30

---------------------------------------------------------------------------
121,200  Total                0.178      8.63      3.98     12.20    0.35

Gold Based Minerals - B-Zone, 7 level

  5,000  NW 1/4 Block 429
         Total                1.29       5.00       .50%      .50%    .79%
---------------------------------------------------------------------------
126,200  Tons Total

[Donald L. Wilson,  Report on the Properties of Leadville Mining & Milling Corp.
August 14, 1989. Mr. Wilson is the President of the Company.]


                                       8
<PAGE>

Weston Fault Massive Sulfide Exploration Targets

The Weston  fault forms the  western  boundary  of the  down-dropped  block that
contains  the  deposits or the Black Cloud mine south and east of the  Company's
properties.  The  Hopemore-Hunter  workings are separated from the Penn Group by
the Weston fault that has had a complex history of movement. Early compressional
tectonics  are  believed  to have  resulted  in minor  over  thrusting  and drag
folding,  possibly  similar to that  along the  Tucson  Main Fault on Iron Hill.
Later normal faulting  resulted in a near vertical  structure with the east side
down  faulted.  These two episodes of movement are believed to have produced two
strands of the Western  Fault.  The ground  between the two strands of the fault
should have  undergone  good ground  preparation  and may contain the  favorable
carbonate  section for massive  sulfide blanket  mineralization.  [Scott Hazlitt
Geological Report, Leadville Mining & Milling Properties, January 1993, Page 8].

Weston Fault Stockwork Breccia Exploration Targets

Along the  southern  strike of the Weston fault zone,  intersecting  faults have
hosted  stockwork  breccia  zones that  contain  precious  metals and are low in
sulfides.  The Antioch mine produced a silicious  gold ore contained in a broken
and  brecciated  porphyry  body  between  two  fault  strands.  Another  similar
stockwork  breccia zone is known as the South Ibex  stockwork  or Capital  stope
that contained  approximately  250,000 tons of ore. There are two strands of the
Weston fault on the Company's  property.  The strike  length  controlled is from
1,400-1,600 feet. [Scott Hazlitt Geological  Report,  Leadville Mining & Milling
Properties, January 1993, Page 9]

Management believes that stockwork  mineralization along the intersection of the
Ibex No. 4 vein and the  Weston  fault  is a good  target  [Thompson's  Magnetic
Anomaly Map (1990),  Johansing,  Page 9]. The stockwork  mineralization could be
hosted by  porphyries  and could range in size from  50,000 to 500,000+  tons of
mineralized material. [Scott Hazlitt,  Evaluation of the Properties of Leadville
Mining & Milling  Corp.,  January  1993.  Chapman and  Stevens,  1929,  Colorado
Mineral Survey;  Leadville District and Adjoining  Territory.] Several veins may
intersect  the Weston fault and more than one  stockwork  body on each strand of
the fault is a possibility [Scott Hazlitt Geological Report,  Leadville Mining &
Milling Properties, January 1993, Page 9].

Planned Exploration  

During  fiscal 1999 the Company plans  exploratory  drilling in the NE 1/4 Block
427, 7th level and in the S 1/2,  Block 995, 6th level.  Block 427 represents an
area of new potential;  whereas,  Block 995 would explore an upward and westward
extension  of the  B-Zone.  During  1998,  exploration  continued  on the B-Zone
location with  encouraging  results.  Exploration of the D-Zone,  Block 452, 7th
level, resulted in the discovery of high-grade base-metal mineralization.


                                       9
<PAGE>

In addition to the exploration targets above,  management is aware of additional
targets of ore potential, some of which are listed below:

     A)   The   Hopemore-Hunter   mine  area  exploration  for  massive  sulfide
          replacement  deposits and vein deposits near previously mined areas or
          in the underlying carbonate hosts.

     B)   Stockwork  breccia  deposits near vein  intersections  with the Weston
          Fault.

     C)   Massive sulfide replacement targets along the footwall or eastern side
          of the Weston Fault.

     D)   Replacement  targets  along the hanging  wall,  or western side of the
          Weston Fault.

     E)   The Penn Group area magnetite-gold and massive sulfide replacement and
          vein targets.

     F)   The magnetic  anomaly  which  extends to the west and southwest of the
          Penn Group-new magnetite-gold and massive sulfide mineralization.  The
          area between the breccia pipe (rhyolite agglomerate) and the west side
          of the magnetic anomaly- massive sulfide mineralization.

[Scott Hazlitt Geological Report, Leadville Mining & Milling Properties, January
1993,  Pages 9-10;  Thompson's  Magnetic  Anomaly Map (1990),  Johansing,  Pages
5-12].

Long hole drilling will continue on the B-Zone upward  extension,  level 6 Block
995 to determine size and shape of the mineral  structure.  The Weston Fault and
#4 (Block 427, level 7) vein juncture also will be tested by tunnel or long hole
drilling.  The cost of the program is  estimated  to be $148,000  and,  assuming
adequate funding,  will require  approximately 12 months. The Company also plans
to commence an exploratory  tunnel from the Hopemore or Hunter shaft location to
the New President shaft,  located at the Penn Group of claims. This project will
be long-term and require  substantially more than one year. It is estimated that
during  fiscal  1999,  its  cost  will  be  $150,000.  See  "Part  II,  Item  6.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations- Liquidity and Capital Resources."

Item 3.  Legal Proceedings

     NONE

Item 4.  Submission of Matters to a Vote of Securityholders

No matters were  submitted to a vote of the  Company's  shareholders  during the
fourth quarter of fiscal 1998.


                                       10
<PAGE>

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     (a)  Marketing  Information  -- The  principal  U.S.  market  in which  the
Company's common shares (all of which are of one class,  $.0001 par value Common
Stock)  are  traded or will trade is in the  over-the-counter  market  (Bulletin
Board  Symbol:  "LMMI").  The  Company's  stock is not  traded  or quoted on any
Automated Quotation System.

The  following  table  sets  forth the  range of high and low bid  quotes of the
Company's  Common Stock per quarter for the past two fiscal years as reported by
the OTC  Bulletin  Board  (which  reflect  inter-dealer  prices  without  retail
mark-up,  mark-down  or  commission  and  may  not  necessary  represent  actual
transactions).

                          MARKET PRICE OF COMMON STOCK


Quarter Ending                                     High and Low Bid
--------------                                     ----------------

July 31, 1998                                  .5936             .4375
April 30, 1998                                 .65625            .4375
January 31, 1998                               .8125             .7500
October 31, 1997                              1.07               .75

July 31, 1997                                 1.1875             .75
April 11, 1997 through
  April 30, 1997                              1.3125             .375
February 1, 1997 through
  April 10, 1997*                              .115              .06
January 31, 1997*                              .135              .08
October 31, 1996*                              .16               .10
-------------------------------
* Prior to a reverse split of the Company's Common Stock on a one-for-ten  basis
effected on April 11, 1997.

     (b) Holders -- The  approximate  number of  recordholders  of the Company's
Common  Stock,  as of  October  26,  1998  amounts  to 1564  inclusive  of those
brokerage firms and/or  clearing houses holding the Company's  common shares for
their  clientele  (with each such  brokerage  house and/or  clearing house being
considered  as one  holder).  The  aggregate  number of  shares of Common  Stock
outstanding is 17,476,796 as of October 26, 1998.

     (c)  Dividends -- The Company has not paid or declared any  dividends  upon
its Common  Stock since its  inception  and, by reason of its present  financial
status and its  contemplated  financial  requirements,  does not  contemplate or
anticipate paying any dividends upon its Common Stock in the foreseeable future.



                                       11
<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

Cautionary Statement on Forward-Looking Statements

Except for the historical  information contained herein,  certain of the matters
discussed in this annual report are "forward-looking  statements," as defined in
Section 21E of the Securities  Exchange Act of 1934, which involve certain risks
and  uncertainties,  which could cause actual results to differ  materially from
those discussed herein including, but not limited to, risks relating to changing
economic  conditions,  changes  in the  prices of  minerals  and the  results of
testing and actual mining.

  The Company  cautions  readers that any such  forward-looking  statements  are
based on management's current expectations and beliefs but are not guarantees of
future performance.  Actual results could differ materially from those expressed
or implied in the forward-looking statements.

Fiscal 1998 Compared to Fiscal 1997

     Results of Operations

During the fiscal year ended July 31, 1998,  the Company  continued  exploration
and  development  activity  at its  gold/silver/base  metal  mining  project  in
Colorado. The effort was mainly concentrated on driving an escape tunnel towards
the Hunter  shaft and  commencing  a vertical  raise to connect  the 5th and 7th
levels.  During  this  time,  the  Company  did not  receive  revenue  from  its
operations  although it expended  considerable  sums for the  development of its
proposed mining and milling operation. (See "Liquidity and Capital Resources").

Exploration  of the B-Zone by long hole  drilling  during 1998  continued on the
Hopemore mine level #7 with encouraging results. Horizontal drilling indicated a
continuation of high-grade gold  mineralization both in a northerly and westerly
direction.  Core  drilling  of the  D-Zone,  Block 452,  7TH level  resulted  in
discovery of a new base metal sulfide zone of  mineralization.  The  exploration
program for fiscal 1999 as currently projected consists of long hole drilling of
NE 1/4 Block 427,  7th level and S 1/2 Block 995,  6th level.  This project will
require approximately 12 months (after funding) and cost an estimated $148,000.

Additional,  Federally  mandated  requirements  must be met during  fiscal 1999.
Before  mining is permitted  under the Federal  safety laws,  the #5 to #7 level
raises must be completed. The estimated cost of this project is $78,000. 000.

The Company has, at present,  approximately 126,200 tons of mineralized material
containing varied amounts of gold, silver,  lead, zinc and copper.  Please refer
to  pages 7 and 8  "Location  of  Mineralized  Material"  The  possible  mineral
potential  of all the  Company's  properties,  as  indicated  by Scott  Hazlett,
Consulting Geologist,  ranges up to 5,000,000. The Company to date has completed
only limited  exploration of the Hopemore 7th level (by crosscut,  raise, drift,
and  drill).   Stopes,  chutes,  ore  passes  and  handling  facilities  are  in
operational condition.  Assuming that adequate funding is available, the Company
is  prepared  


                                       12
<PAGE>

to  enter  into  a  limited  mining  and  milling  schedule  should   sufficient
mineralized   material  be  discovered   and  extraction  be  determined  to  be
economically profitable.

If sufficient  ore is discovered  during fiscal 1999, the Company would commence
mining and milling at an initial pilot rate of 35-50 tons per day and, gradually
increase tonnage as ore availability  allows.  To operate the mine and mill on a
four-month  pilot  basis  would  cost  an  estimated  $350,000.   Cash  flow  is
anticipated (but cannot be assured) during the fifth month after commencement of
mining and milling.

Management believes that, in order to reach a mine/mill capacity of 300 tons per
day, the Company would attempt to discover and develop, a one year supply of ore
(120,000  tons).  To fund the program an  investment of  approximately  $120,000
would be required.  The project would consist of the initial 480' segment of the
1700' tunnel planned to connect with the Penn Group claims. The tunnel will pass
through  carbonate  host rocks  (Blue  Lime or White  Lime)  where  potentially,
large-scale mineralization may be encounted.

With Regards,  to all estimates of mineral tonnage,  additional geologic work is
needed before a conclusion  can be made that it is commercial  material or, that
ore exists.

The Company  generated no revenues from operations during the fiscal years ended
July 31,  1998 and 1997.  There were de minimis  non-operating  revenues  during
these periods of $1,377 and $2,063,  respectively.  Over all, costs and expenses
remained  the same from  fiscal  1997 to fiscal  1998.  However,  mine  expenses
increased  by  $97,495  (approximately  30.7%)  from  1997  ($318,141)  to  1998
($415,636).  The increase in mine expenses resulted primarily from expanded work
at the mine. Selling,  General and administrative  expenses decreased by $96,148
(approximately 19.9%) from 1997 ($482,380) to 1998 ($386,232) primarily due to a
decrease in the cost of raising capital. As a result, the Company's net loss for
1998 was $807,181, which was $1,685 more than its 1997 loss of $805,496.

Liquidity and Capital Resources

As of July 31, 1998, the Company's current liabilities exceed its current assets
by a  ratio  of  approximately  3 to 1 and the  Company  had a  working  capital
deficiency  of $40,348.  Therefore,  the  Company  can only  continue as a going
concern  in the  event  that it  obtains  additional  capital.  As noted  above,
management  anticipates  that  it  will  need  at  least  $1,002,000  to  become
commercially  operational on a reduced scale and begin generating  revenues from
operations.  To obtain  such  funding,  management  intends to raise  additional
capital through the sale of its securities and/or debt financing.

Specific plans to obtain financing for a full scale mining and milling operation
will most likely include a combination of one or more of the following:

     1.   Private  placements  of  the  Company's  securities  to  institutions;
          private  individuals  and investment  groups.  During fiscal 1997, the
          Company  raised  approximately  $657,597  through  the sale of  common
          stock.  These  investments  have  enabled the Company to complete  the
          Hunter  shaft,  test  the  mill  and do  long-hole  drilling  and core
          drilling.

                                       13
<PAGE>

     2.   A working  arrangement  with a mining  company  pursuant  to which the
          Company would mine and the other company would mill,  smelt and market
          the products.  Under these  conditions,  the  Company's  cost would be
          concentrated on the mining effort only. The Company currently has such
          an agreement  with  ASARCO.  The ASARCO  agreement  ran for an initial
          two-year  term  and,  since   September  1,  1997,  the  Agreement  is
          cancelable by either party on 60 day's  written  notice and remains in
          force.  Notwithstanding the foregoing,  the Agreement would not extend
          beyond June 30, 2000.  Pursuant to the  Agreement,  the Company  would
          deliver metallic  minerals to the ASARCO mill site six miles southeast
          of Leadville, Colorado. The price for the material would be based upon
          the London Metals Exchange market price,  less certain  deductions for
          treatment  and  impurities.  In the  event  the  ASARCO  Agreement  is
          canceled, the Company believes that its mill has flotation capacity to
          process sulfide ores.

Assuming  that the Company is able to obtain funds from one or more of the above
sources,  planned  activities  over the next year, in order of priority,  are as
follows:

<TABLE>
<CAPTION>
                                                                         Estimated Time Required
                                                                         to Complete (or Operating
                                                                         Time -  Production),
                  Activity                      Estimated Cost           Assuming Funding    
                  --------                      --------------           ----------------    
<S>                                               <C>                   <C>
(a)   Complete level #7 to                        $ 78,000              4 Months
          level #5 raise

(b)   Exploration by tunnel 
      to Penn Group minerals. Prove up
      120,000 tons of ore                         $150,000              6 Months (beginning of 1700"
                                                                              tunnel)
(c)   Continuation of long hole and core 
      drilling on B-Zone; level 6 and
      Block 427,   level 7 to Weston Fault        $148,000             10 Months

(d)   Operate Mine & Mill                         $350,000              4 Months (prior to revenue)
</TABLE>


Aside from the above  planned  activities,  the Company's  basic  administrative
capital needs (e.g. rent, salaries,  utilities,  etc.) are approximately $23,000
per month.  Management  has been funding these basic  requirements  and hopes to
continue  to fund these  requirements  through  the  private  sale of its Common
Stock.  During the year ended July 31, 1998, the Company obtained  approximately
$657,597 from the private sale of Common Stock.

During  the  fiscal  year the  Company  needs to  raise  $1,002,000  in order to
complete the planned projects.

There is no assurance  whatsoever  that any of the Company's  proposed  plans to
raise capital and otherwise fund operations will prove successful. The Company's
inability to obtain


                                       14
<PAGE>

sufficient  funding will delay the Company's  planned  operations or,  possibly,
force the Company to go out of business.

Environmental Issues

Management  does not  expect  that  environmental  issues  will have an  adverse
material  effect on the  Company's  liquidity  or  earnings.  Before  any mining
development or mining  exploration or construction of milling  facilities  could
begin, it was necessary to meet all  environmental  requirements  and to satisfy
the regulatory  agencies in Colorado that the Company's proposed procedures fell
within the boundaries of sound environmental  practice. The Company is bonded to
insure  procedures  and  reclamation  of any areas  disturbed  by the  Company's
activities.  In 1997,  the Mined Land  Reclamation  Board reviewed the Company's
permit and bond and determined  that an increase in the bond was  necessary.  At
that time, the Company placed an additional  $6,000 in escrow against any future
indemnity.

Part of the Leadville  Mining  District was declared a Superfund  site.  Several
mining  companies  and one  individual  were  declared  defendants in a possible
lawsuit.  The Company was not named a defendant or Possible  Responsible  Party.
The Company did  respond in full detail to a lengthy  questionnaire  prepared by
the Environmental  Protection  Agency ("EPA")  regarding the Company's  proposed
procedures and past activities in November 1990. To the Company's knowledge, the
EPA has initiated no further comments or questions.

The Company  does  include in all its internal  revenue and cost  projections  a
certain amount for environmental and reclamation costs on an ongoing basis. This
amount is determined at a fixed amount of $1.50 per ton of material to be milled
on a continual,  ongoing basis to provide for further tailing disposal sites and
to reclaim the  tailings  disposal  sites in use.  At this time,  there does not
appear to be any environmental  costs to be incurred by the Company beyond those
already   addressed  above.  No  assurance  can  be  given  that   environmental
regulations  will not be changed in a manner  that  would  adversely  affect the
Company's planned operations.

Year 2000 Computer Issue

At the present, and for the foreseeable future, management does not believe that
computers will play a material role in the company's operations. At present, the
Company  only  uses  computers  for  simple  tasks  such  as  work   processing.
Accordingly,  management  does not believe that the potential year 2000 computer
problem will materially affect the Company's current or planned  operations.  If
and when the Company commences mining and milling  operations,  it will interact
with outside  entities  such as  suppliers,  smelters,  refiners and  government
agencies  The  Company  is unable to predict  whether  the  potential  year 2000
computer problem will adversely affect these entities.  It is conceivable,  that
if one or more of these  entities is adversely  affected by the  potential  year
2000 computer  problem,  the Company's  operations  might be adversely  affected
also.

Item 7.  Financial Statements.

For the Financial  Statements  required by Item 7 see the  Financial  Statements
included elsewhere in this Form 10-KSB.



                                       15
<PAGE>

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosures.

There have been no changes in or disagreements  with accountants with respect to
accounting and/or financial disclosure.


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

The following table sets forth certain information  concerning the directors and
executive officers of the Company:

                                           First
                                           Became
Name                         Age          Director    Position
----                         ---          --------    --------

Donald W. Wilson             70           9/22/82     President & Director

Gifford A. Dieterle          67           9/22/82     Executive Vice President,
                                                      Secretary, Treasurer
                                                      & Chairman of the Board

Robert Roningen              66           9/14/93     Vice President- Operations
                                                      & Director

Horst Scherp                 70           1/25/95     Director

Jack V. Everett              77           1/25/95     Director

Directors are elected at the meeting of shareholders called for that purpose and
hold office until the next shareholders meeting called for that purpose or until
their  resignation  or death.  Officers  of the  corporation  are elected by the
directors at meetings called by the directors for its purpose.

DONALD W. WILSON,  President and Director.  His highest  educational degree is a
High School diploma  obtained from Leadville High School in Leadville,  Colorado
in 1949.  He  additionally  attended the  Colorado  School of Mines in 1969 on a
non-matriculating  basis, where he took courses in geology,  surveying,  mapping
and mathematics.  He did not graduate and therefore did not obtain a degree. His
employment history since 1977 consists of the following: From May 1983 until the
present, he has been President of the Company. From January 1981 to May 1983, he
was mine and mill manager of the Franklin  Mine, a gold mine in Colorado,  which
is owned by Franklin  Consolidated  Mining  Company.  From 1979 to 1980,  M.S.T.
Company - Rio Blanco Oil Shale Corporation,  employed him as a project engineer.
From 1977 to 1979, United Nuclear-Homestake  Partnership,  Inc., Grants, and New
Mexico employed him as a superintendent of shaft sinking operation.



                                       16
<PAGE>

GIFFORD A.  DIETERLE,  Executive  Vice-President,  Treasurer and Chairman of the
Board of Directors of the Company.  His highest  educational degree is a M.S. in
Geology  obtained  from New York  University.  From 1977 until July 1993, he was
Chairman, Treasurer and Executive Vice-President of Franklin Consolidated Mining
Company. From 1965 to 1987, he was lecturer in geology at the City University of
N.Y. (Hunter Division).  Since 1962, he has been a consulting  geologist engaged
in the geological evaluation of oil and mineral properties.  From 1978 until the
present, he has been a registered representative with Datek Securities.

ROBERT RONINGEN,  Vice  President-Operations  and a director, has, for more than
the past five years,  been engaged in the practice of law as a sole practitioner
and is a self-employed consultant geophysicist in Duluth,  Minnesota.  From 1988
to August 1993, he was an officer and director of Franklin  Consolidated  Mining
Company, Inc. He graduated from the University of Minnesota in 1957 with a B.A.
in geology and in 1962 with a degree in Law.

HORST SCHERP, a director,  has been an Associate  Professor of Geology at Hunter
College of the City of New York since 1963. From 1980 to 1987, he was a Director
and geologist for Jeger Oil Corp. Mr. Scherp received a Ph.D in geology from the
University of Gottingen, Germany, in 1959.

JACK V.  EVERETT,  a director,  has been a consulting  mining  geologist  for 25
years, with expertise in all phases of exploration for base and precious metals.
Following his 1947  graduation from Michigan State  University,  he was District
Geologist  for  Pickands  Mather & Company on the Cuyuna Iron Range,  Minnesota.
From 1951 to 1970, he was Chief Geologist and Exploration Manager for W.S. Moore
Company,  Duluth,  Minnesota,  an iron mining  company  with gold and base metal
sulfide holdings in the U.S. and Canada.

Compliance with Section 16(a) of The Securities Exchange Act of 1934

To the Company's  knowledge,  based solely on a review of such  materials as are
required by the  Securities  and Exchange  Commission,  no officer,  director or
beneficial  holder  of  more  than  ten  percent  of the  Company's  issued  and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange  Commission  any form or report  required  to be so filed  pursuant  to
Section  16(a) of the  Securities  Exchange  Act of 1934  during the fiscal year
ended July 30, 1998, except that Gifford A. Dieterle,  Donald W. Wilson,  Robert
Roningen,  Horst  Scherp  and Jack V.  Everett  each  failed to file one  report
concerning one transaction.

The following  table shows all the cash  compensation  paid or to be paid by the
Company or any of its subsidiaries,  as well as certain other  compensation paid
or accrued,  during the fiscal years indicated,  to the Chief Executive  Officer
for such period in all capacities in which he served. No other Executive Officer
received total annual salary and bonus in excess of $100,000.




                                       17
<PAGE>

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                           Long-Term Compensation            
                                                                               ----------------------------------------------
                                      Annual Compensation                             Awards                    Payouts      
                              ---------------------------------                ---------------------     --------------------
        (a)                     (b)           (c)         (d)         (e)         (f)         (g)           (h)        (i)  
------------------            -------       -------     -------    ---------   ---------    --------     ---------   --------
                                                                     Other     Restrict-                             All Other
                                                                     Annual     ed Stock                   LTIP      Compensa
Name and Principal                                                  Compen-      Award      Options       Payouts     -tion
    Position                   Year         Salary        ($)      sation($)      ($)         SARs          ($)         (i)  
------------------            -------       -------     -------    ---------   ---------    --------     ---------   --------
<S>                             <C>          <C>          <C>          <C>        <C>       <C>             <C>        <C>
Donald W. Wilson                1998         63,320       -0-          -0-        -0-       150,000         -0-        -0-
Chief Executive                 1997         54,586       -0-          -0-        -0-       350,000         -0-        -0-
  Officer                       1996         54,023       -0-          -0-        -0-       200,000         -0-        -0-
</TABLE>

The  following  table  sets forth  information  with  respect  to the  Company's
Executive  Officers  concerning  the  grants of options  and Stock  Appreciation
Rights ("SAR") during the past fiscal year:


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                Individual Grants

<TABLE>
<CAPTION>
  (a)                       (b)                           (c)                  (d)                      (e)     
-----------------------------------------------------------------------------------------------------------------
                                                     Percent of Total
                                                     Options/SARs
                          Options/                   Granted to
                          SARs                       Employed in           Exercise or Base          Expiration
Name                      Granted                    Fiscal Year           Price ($/SH)              Date       
-----------------------------------------------------------------------------------------------------------------
<S>                       <C>                            <C>                  <C>                   <C>    
Donald W. Wilson          150,000                        24.6%                $.22                  June 5, 2001
Gifford Dieterle          150,000                        24.6%                $.22                  June 5, 2001
Robert Roningen           150,000                        24.6%                $.22                  June 5, 2001
Jack Everett              150,000                        24.6%                $.22                  June 5, 2001
Horst Scherp               10,000                         1.6%                $.22                  June 5, 2001
</TABLE>


The  following  table  sets forth  information  with  respect  to the  Company's
Executive  Officers  concerning  exercise of options during the last fiscal year
and unexercised options and SARs held as of the end of the fiscal year:


         Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR

<TABLE>
<CAPTION>
  (a)                              (b)             (c)           (d)                   (e)          
---------------------------------------------------------------------------------------------------
                                                                                   Value of
                                                              Number of            Unexercised
                                                              Unexercised          In-the-Money
                                                              Options/SARs         Option/SARs
                               Shares                         at FY-End(#)         at FY-End(#)
                               Acquired on       Value        Exercisable/         Exercisable/
     Name                      Exercise (#)      Realized     Unexercisable        Unexercisable
---------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>         <C>                  <C>
Donald W. Wilson                    -0-             -0-         700,000                --
Gifford Dieterle                    -0-             -0-         553,270                --
Robert Roningen                     -0-             -0-         500,000                --
Jack Everett                        -0-             -0-         225,000                --
Horst Scherp                        -0-             -0-          20,000              10,000
</TABLE>


                                       18
<PAGE>


The  following  table  sets forth  information  with  respect  to the  Executive
Officers  concerning  awards  under long term  incentive  plans  during the last
fiscal year:

<TABLE>
<CAPTION>
                                                             Estimated Future Payouts under Non-Stock
                                                             Price Based Plans
       (a)                (b)              (c)                  (d)              (e)               (f)
                                       Performance           --------------------------------------------
                      Number of        or Other
                      Shares, Units    Period Until
                      or Other         Maturation or         Threshold          Target           Maximum
      Name            Rights(#)        Payout                ($ or #)           ($ or #)         ($ or #)
      -----           ------------     -------------         ---------          --------         --------
<S>                        <C>          <C>                  <C>                <C>                 <C>
Donald W. Wilson           -0-
Gifford Dieterle           -0-
Robert Roningen            -0-
Jack. Everett              -0-
Horst Scherp               -0-
</TABLE>

Directors  are not  compensated  for  acting  in their  capacity  as  Directors.
Directors are reimbursed for their  accountable  expenses  incurred in attending
meetings and conducting their duties.

Item 11. Security Ownership of Certain Beneficial Owners and Management

     (a)  Security  Ownership  of Certain  Beneficial  Owners -- The persons set
forth on the charts below are known to the Company to be the  beneficial  owners
of more than 5% of the Company's  outstanding  voting Common Stock as of October
28, 1998.

     (b) Security  Ownership of Management -- Information  concerning the number
and  percentage  of shares of voting Common Stock of the Company owned of record
and  beneficially  by  management  as of October 28,  1998,  is set forth on the
charts below.

<TABLE>
<CAPTION>
                       Name of                    Amount & Nature
                       Beneficial                 of Beneficial                     Approximate
Title of Class         Owner                      Ownership 10/28/98                Percentage(1)(2) 
--------------         -----                      ------------------                ---------------- 
<S>                    <C>                           <C>                                  <C>
Common Stock           Donald W. Wilson               1,440,019(2)                         7.9%

Common Stock           Gifford A. Dieterle            1,543,157(2)(3)                      8.6%

Common Stock           Jack Everett                     225,000(2)                         1.3%

Common Stock           Robert Roningen                  800,000(2)(4)                      4.5%

Common Stock           Horst Scherp                      25,000(2)                          *

Common Stock           Richard Shevchenko               894,849(5)                         5.1%

All Officers and
Directors as a
Group (5)                                            4,033,1766(2)(3)(4)                  20.7%
</TABLE>

---------


                                       19
<PAGE>

*    Less than one percent.

(1)  Based upon 17,476,796 shares issued and outstanding as of October 26, 1998.

(2)  For  Messrs.  Wilson,  Dieterle,  Everett,  Roningen  and Scherp  includes,
     respectively,  700,000  shares,  553,270 shares,  225,000  shares,  500,000
     shares and 20,00 shares issuable upon exercise of options and/or warrants.

(3)  Includes shares owned by Mr. Dieterle's wife.

(4)  Includes shares owned by Mr. Roningen's wife and children.

(5)  Includes shares owned by Mr. Shevchenko's wife and children


Item 12. Certain Relationships and Related Transactions.

Effective April 11, 1997, the Company  reverse split its  outstanding  shares of
Common Stock on a  one-for-ten  basis and adjusted the terms of  all-outstanding
options and  warrants  accordingly.  Unless the context  specifically  indicates
otherwise,  all  references  herein to Shares,  options and  warrants  have been
adjusted to take into account the reverse split.

On June 5, 1998,  the Company issued the following  options to certain  officers
and  directors.  Donald  Wilson - option to  purchase  150,000  shares;  Gifford
Dieterle - option to purchase 150,000 shares; Robert Roningen option to purchase
150,000 shares; Jack Everett -option to purchase 150,000 shares;  Horst Scherp -
option to purchase  10,000  shares.  All options  granted on that date expire on
June 5, 2001 and are exercisable at $.22 per share.

On April 2, 1997, the Company issued the following  options to certain  officers
and  directors.  Donald  Wilson - option to  purchase  350,000  shares;  Gifford
Dieterle - option to purchase 350,000 shares; Robert Roningen option to purchase
350,000 shares;  Jack Everett -option to purchase 50,000 shares;  Horst Scherp -
option to purchase  10,000  shares.  All options  granted On that date expire on
April 2, 2001 exercisable at $.35 per share.

On January 5, 1996, the Company issued the following options to certain officers
and  directors.  Donald  Wilson - option to  purchase  200,000  shares;  Gifford
Dieterle  - option to  purchase  220,000  shares;  Robert  Roningen  - option to
purchase 150,000 shares; Jack Everett - option to purchase 25,000 shares;  Horst
Scherp - option to  purchase  5,000  shares.  All  options  granted on that date
expire on January 5, 1998 and are exercisable at $.35 per share.



                                       20
<PAGE>

Item 13. Exhibits and Reports on Form 8-K.

Exhibits

   3.a   Certificate of Incorporation of Company(1) 
   3.b   Amendments to Certificate of Incorporation of Company(1) 
   3.c   By-Laws of Company (1)
  10.a   Mining Claims (1)
  10.b   ASARCO Agreement

---------

(1)  Previously filed as an exhibit to the Company's  Registration  Statement on
     Form S-18 (SEC File No.  2-86160-NY)  filed on or about  November 10, 1983,
     and incorporated herein by this reference.

Reports of Form 8-K

The  Company has filed the  following  Reports of Form 8-K during the year ended
July  31,  1998  with  the  principal  office  of the  Securities  and  Exchange
Commission in Washington, D.C.:

                                      None

Statements  contained in this Form 10-KSB as to the contents of any agreement or
other document  referred to are not complete,  and where such agreement or other
document  is an exhibit to this  Report or is  included  in any forms  indicated
above,  each such  statement  is deemed to be  qualified  and  amplified  in all
respects by such provisions.



                                       21
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                             LEADVILLE MINING AND MILLING CORP.

                                                
Dated: Oct. 30, 1998                         By:  /s/  Donald W. Wilson
                                                  ------------------------------
                                                  Donald W. Wilson, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

          SIGNATURES                        TITLE                      DATE
          ----------                        -----                      ----

/s/ Donald W. Wilson
---------------------------           President, Principal         Oct. 30, 1998
Donald W. Wilson                      Executive Officer and
                                      a Director

/s/ Gifford A. Dieterle
---------------------------           Treasurer and                Oct. 30, 1998
Gifford A. Dieterle                   Principal Financial
                                      and Accounting
                                      Officer and Chairman
                                      of the Board of Directors

/s/ Jack Everett
---------------------------           Director                     Oct. 30, 1998
Jack Everett


/s/ Robert Roningen
---------------------------           Director                     Oct. 30, 1998
Robert Roningen


/s/ Horst Scherp
---------------------------           Director                     Oct. 30, 1998
Horst Scherp



                                       22
<PAGE>


                            SUPPLEMENTAL INFORMATION

Supplemental  Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.



                                 NOT APPLICABLE.




                                       23
<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)


                          INDEX TO FINANCIAL STATEMENTS
                       FILED WITH THE ANNUAL REPORT OF THE
                             COMPANY ON FORM 10-KSB



                        FOR THE YEAR ENDED JULY 31, 1998



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

BALANCE SHEET AS OF JULY 31, 1998, LEADVILLE MINING AND MILLING CORP.

STATEMENT OF OPERATIONS FOR THE YEARS ENDED JULY 31, 1998 AND JULY 31, 1997, AND
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998, LEADVILLE MINING
AND MILLING CORP.

STATEMENT OF CHANGES IN  STOCKHOLDERS'  EQUITY FOR THE PERIOD SEPTEMBER 17, 1982
(INCEPTION) TO JULY 31, 1998, LEADVILLE MINING AND MILLING CORP.

STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1998 AND JULY 31, 1997, AND
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998, LEADVILLE MINING
AND MILLING CORP.

NOTES TO FINANCIAL STATEMENTS




                         ------------------------------



Other  schedules not submitted are omitted,  because the information is included
elsewhere in the financial  statements or the notes  thereto,  or the conditions
requiring the filing of these schedules are not applicable.

As to certain matters,  the financial  statements  herein differ in presentation
from,  and include  data which are not  contained  in, the  Company's  published
financial statements to stockholders.  Such presentation and additional data are
submitted  solely for the purpose of complying  with the  applicable  accounting
requirements of Form 10-KSB and Regulation S-X.

<PAGE>

[Letterhead of Wolinetz, Gottlieb & Lafazan, P.C.]



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Board of Directors & Shareholders of
Leadville Mining and Milling Corp.

We have audited the  accompanying  balance sheet of Leadville Mining and Milling
Corp. (A  Development  Stage  Enterprise)  as of July 31, 1998,  and the related
statements of  operations,  changes in  stockholders'  equity and cash flows for
each of the two  years in the  period  ended  July 31,  1998 and for the  period
September 17, 1982 (Inception) to July 31, 1998. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Leadville Mining and Milling
Corp. (A  Development  Stage  Enterprise) as of July 31, 1998 and the results of
its  operations and its cash flows for each of the two years in the period ended
July 31, 1998 and for the period September 17, 1982 (Inception) to July 31, 1998
in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements, the Company has incurred recurring losses through July 31,
1998 of $6,315,397 and has a working  capital  deficiency of $40,348 at July 31,
1998 that  raises  substantial  doubt  about its  ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 10.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.


                                          /s/ WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
                                              WOLINETZ, GOTTLIEB & LAFAZAN, P.C.

Rockville Centre, New York
October 12, 1998


                                       F-1



<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                  BALANCE SHEET
                                  JULY 31, 1998


                                     ASSETS

Current Assets:
  Cash                                                              $    11,574
  Loans Receivable                                                        8,490
  Other Current Assets                                                      184
                                                                    -----------
     Total Current Assets                                                20,248
                                                                    -----------
Property and Equipment (Net of
  Accumulated Depreciation of $350,154)                               1,355,497
                                                                    -----------

Other Assets:
  Mining Reclamation Bonds                                               11,000
  Security Deposit                                                        3,667
                                                                    -----------
   Total Other Assets                                                    14,667
                                                                    -----------
Total Assets                                                        $ 1,390,412
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accrued Expenses and Taxes                                        $    60,596
                                                                    -----------

Commitments and Contingencies

Stockholders' Equity:
  Common Stock, Par Value $.001 Per Share;
    Authorized 150,000,000 shares; Issued and
    Outstanding 16,841,142 Shares                                        16,841
  Capital Paid In Excess of Par Value                                 7,628,372
  Deficit Accumulated in the Development Stage                       (6,315,397)
                                                                    -----------
     Total Stockholders' Equity                                       1,329,816
                                                                    -----------
Total Liabilities and Stockholders' Equity                          $ 1,390,412
                                                                    ===========



     The accompany notes are an integral part of the financial statements.

                                       F-2



<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                             STATEMENT OF OPERATIONS

                                                                  For The Period
                                                                   September 17,
                                        For The Year Ended             1982
                                              July 31,             (Inception)
                                    ----------------------------        To
                                        1998            1997       July 31, 199
                                    ------------    ------------   ------------
Revenues:
  Interest Income                   $        877    $        840    $    709,111
  Miscellaneous                              500           1,223          25,206
                                    ------------    ------------    ------------

    Total Revenues                         1,377           2,063         734,317
                                    ------------    ------------   ------------

Costs and Expenses:
  Mine Expenses                          415,636         318,141      2,139,349
  Selling, General and
    Administrative Expenses              386,232         482,380      4,422,477
  Depreciation                             5,322           6,350        350,154
  Loss on Write-Off of
    Investment                              --              --           10,000
  Loss on Joint Venture                     --              --          101,700
                                    ------------    ------------   ------------

  Total Costs and
     Expenses                            807,190         806,871      7,023,680
                                    ------------    ------------   ------------

Loss Before Provision
  For Income Taxes                      (805,813)       (804,808)    (6,289,363)

Provision For Income
  Taxes                                    1,368             688         26,034
                                    ------------    ------------   ------------

Net Loss                            $   (807,181)   $   (805,496)  $ (6,315,397)
                                    ============    ============   ============


Net Loss Per Share                  $       (.05)   $       (.06)
                                    ============    ============

Average Common Shares Outstanding     15,620,231      13,535,361
                                    ============    ============



The accompanying notes are an integral part of the financial statements.

                                       F-3


<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998

<TABLE>
<CAPTION>
                                                                               Deficit
                                                                             Accumulated
                                           Common Stock        Capital Paid    In The
                                      -----------------------  In Excess of  Development
                                        Shares       Amount      Par Value     Stage          Total
                                      ----------   ----------   ----------   ----------    ----------
<S>                                    <C>          <C>          <C>         <C>           <C>      
Balance
  September 17, 1982
  (Inception)                                -0-    $     -0-    $     -0-   $      -0-     $     -0-

Initial Cash
  Officers - At $.001 Per Share        1,575,000        1,575         --           --           1,575

  Other Investors -
    At $.001 Per Share                 1,045,000        1,045         --           --           1,045

Initial - Mining Claims                     --
  Officer - At $.002 Per Share           875,000          875          759         --           1,634

Common Stock Issued For:
  Cash At $.50 Per Share                 300,000          300      149,700         --         150,000

Net Loss                                    --           --           --         (8,486)       (8,486)
                                      ----------   ----------   ----------   ----------    ----------
Balance - July 31, 1983                3,795,000        3,795      150,459       (8,486)      145,768

Common Stock Issued For:
  Cash Pursuant to Initial Offering
  At $1.50 Per Share, Net of
  Offering Costs of $408,763           1,754,741        1,755    2,221,594         --       2,223,349


Net Income                                  --           --           --         48,890        48,890
                                      ----------   ----------   ----------   ----------    ----------


Balance - July 31, 1984                5,549,741        5,550    2,372,053       40,404     2,418,007

Net Income                                  --           --           --         18,486        18,486
                                      ----------   ----------   ----------   ----------    ----------
Balance - July 31, 1985                5,549,741        5,550    2,372,053       58,890     2,436,493

Common Stock Issued For:
  Mineral Lease At $1.00 Per Share           100         --            100         --             100

Net Income                                  --           --           --          4,597         4,597
                                      ----------   ----------   ----------   ----------    ----------
Balance - July 31, 1986                5,549,841        5,550    2,372,153       63,487     2,441,190
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       F-4



<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998

<TABLE>
<CAPTION>
                                                                        Deficit
                                                                      Accumulated
                                 Common Stock         Capital Paid      In The
                           -------------------------  In Excess of    Development
                             Shares         Amount      Par Value        Stage          Total     
                           -----------   -----------  -------------   -----------    -----------
<S>                          <C>         <C>           <C>            <C>            <C>         
Net Loss                          --     $      --     $      --      $  (187,773)   $  (187,773)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1987      5,549,841         5,550     2,372,153       (124,286)     2,253,417

Common Stock Issued For:
  Services Rendered At
    $1.00 Per Share             92,000            92        91,908           --           92,000

Net Loss                          --            --            --         (328,842)      (328,842)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1988      5,641,841         5,642     2,464,061       (453,128)     2,016,575

Net Loss                          --            --            --         (379,852)      (379,852)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1989      5,641,841         5,642     2,464,061       (832,980)     1,636,723

Common Stock Issued For:
  Cash:
    At $.70 Per Share          269,060           269       194,219           --          194,488
    At $.50 Per Share          387,033           387       199,443           --          199,830
  Services:
    At $.50 Per Share           68,282            68        34,073           --           34,141
  Commissions:
    At $.70 Per Share           15,000            15           (15)          --             --

Commissions Paid                  --            --          (2,100)          --           (2,100)

Net Loss                          --            --            --         (529,676)      (529,676)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1990      6,381,216         6,381     2,889,681     (1,362,656)     1,533,406

Common Stock Issued For:
  Cash At $.60 Per Share       318,400           319       180,954           --          181,273

Net Loss                          --            --            --         (356,874)      (356,874)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1991      6,699,616         6,700     3,070,635     (1,719,530)     1,357,805
</TABLE>



The accompanying notes are an integral part of the financial statements.

                                       F-5

<PAGE>




                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998


<TABLE>
<CAPTION>
                                                         Deficit
                                                       Accumulated
                                  Common Stock         Capital Paid     In The
                           -------------------------   In Excess of   Development
                             Shares         Amount      Par Value        Stage          Total
                           -----------   -----------   ------------   -----------    -----------
<S>                          <C>         <C>           <C>            <C>            <C>        
Common Stock Issued For:
  Cash:
    At $.30 Per Share          114,917   $       115   $    34,303    $      --      $    34,418
    At $.50 Per Share            2,000             2           998           --            1,000
    At $.60 Per Share           22,867            23        13,698           --           13,721
    At $.70 Per Share           10,000            10         6,990           --            7,000
    At $.80 Per Share            6,250             6         4,994           --            5,000
    At $.90 Per Share            5,444             5         4,895           --            4,900
  Services:
    At $.32 Per Share           39,360            39        12,561           --           12,600
    At $.50 Per Share           92,353            93        46,084           --           46,177
  Exercise of Options:
    At $.50 Per Share By
      Related Party            100,000           100        49,900           --           50,000

Net Loss                          --            --            --         (307,477)      (307,477)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1992      7,092,807         7,093     3,245,058     (2,027,007)     1,225,144

Common Stock Issued For:
  Cash:
    At $.30 Per Share          176,057   $       176   $    51,503    $      --      $    51,679
    At $.50 Per Share          140,000           140        69,964           --           70,104
    At $.60 Per Share           10,000            10         5,990           --            6,000
    At $.70 Per Share           17,000            17        11,983           --           12,000
    At $1.00 Per Share          50,000            50        49,950           --           50,000
  Services:
    At $.50 Per Share          495,556           496       272,504           --          273,000
  Commissions:
    At $.50 Per Share           20,220            20           (20)          --             --

Commissions Paid                  --            --          (1,500)          --           (1,500)

Net Loss                          --            --            --         (626,958)      (626,958)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1993      8,001,640         8,002     3,705,432     (2,653,965)     1,059,469
</TABLE>



The accompanying notes are an integral part of the financial statements.

                                       F-6

<PAGE>



                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998

<TABLE>
<CAPTION>
                                                                    Deficit
                                                                  Accumulated
                                             Common Stock         Capital Paid     In The
                                      -------------------------   In Excess of   Development
                                         Shares        Amount      Par Value        Stage          Total
                                      -----------   -----------   -----------    -----------    -----------
<S>                                    <C>          <C>           <C>            <C>            <C>        
Common Stock Issued For:
  Cash:
    At $.30 Per Share                     149,330   $       150   $    43,489    $      --      $    43,639
    At $.50 Per Share                     377,205           377       189,894           --          190,271
Services:
    At $.30 Per Share                     500,000           500       149,500           --          150,000
    At $.50 Per Share                     130,000           130        71,287           --           71,417
    At $.50 Per Share
      By Related Party                     56,000           156        77,844           --           78,000
    At $.70 Per Share                       4,743             4         3,316           --            3,320
  Exercise of Options For Services:
    At $.50 Per Share                      35,000            35        17,465           --           17,500
    At $.50 Per Share
     By Related Party                     150,000           150        74,850           --           75,000

Net Loss                                     --            --            --         (665,909)      (665,909)
                                      -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1994                 9,503,918         9,504     4,333,077     (3,319,874)     1,022,707

Common Stock Issued For:
  Cash:
    At $.30 Per Share                     150,000   $       150   $    49,856    $      --      $    50,006
    At $.40 Per Share                     288,200           288       115,215           --          115,503
    At $.50 Per Share                     269,611           270       132,831           --          133,101
    At $.60 Per Share                     120,834           121        72,379           --           72,500
    At $.70 Per Share                      23,000            23        16,077           --           16,100
Services:
    At $.40 Per Share                     145,000           145        60,755           --           60,900
    At $.50 Per Share                      75,000            75        34,925           --           35,000
Exercise of Options For:
  Cash:
  At $.50 Per Share
    By Related Party                      350,000           350       174,650           --          175,000
Services:
  At $.50 Per Share                        35,000            35        17,465           --           17,500

Commissions Paid                             --            --          (1,650)          --           (1,650)

Net Loss                                     --            --            --         (426,803)      (426,803)
                                      -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1995                10,960,563   $    10,961   $ 5,005,580    $(3,746,677)   $ 1,269,864
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       F-7


<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998

<TABLE>
<CAPTION>
                                                             Deficit
                                                           Accumulated
                                      Common Stock         Capital Paid      In The
                               -------------------------   In Excess of   Development
                                  Shares        Amount       Par Value       Stage          Total
                               -----------   -----------   -----------    -----------    -----------
<S>                               <C>        <C>           <C>            <C>            <C>        
Common Stock Issued For:
  Cash:
    At $.40 Per Share               75,972   $        76   $    30,274    $      --      $    30,350
    At $.50 Per Share              550,423           550       270,074           --          270,624
    At $.60 Per Share              146,773           147        87,853                        88,000
    At $.70 Per Share               55,722            56        38,949                        39,005
    At $.80 Per Share              110,100           110        87,890                        88,000

Services:
    At $.40 Per Share              104,150           104        38,296           --           38,400
    At $.50 Per Share               42,010            42        20,963           --           21,005
    At $.60 Per Share                4,600             5         2,755                         2,760
    At $.70 Per Share              154,393           155       107,920                       108,075

  Commissions:
     At $.35 Per Share              23,428            23           (23)
     At $.50 Per Share              50,545            50           (50)
     At $.60 Per Share               2,000             2            (2)
     At $.70 Per Share              12,036            12           (12)

  Exercise of Options:
    Cash:
      At $.35 Per Share
        By Related Party            19,571            20         6,830                         6,850

    Services:
      At $.35 Per Share
        By  Related Party          200,429           200        69,950           --           70,150
      At $.50 Per Share             95,000            95        47,405           --           47,500

     Compensation Portion of
        Options Exercised             --            --         261,500           --          261,500

Net Loss                              --            --            --         (956,043)      (956,043)
                               -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1996         12,607,715        12,608     6,076,152     (4,702,720)     1,386,040
</TABLE>


The accompanying notes are an integral part of the financial statements.

                                       F-8

<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998


<TABLE>
<CAPTION>
                                                         Deficit
                                                       Accumulated
                                 Common Stock          Capital Paid     In The
                           -------------------------   In Excess of   Development
                              Shares       Amount       Par Value        Stage          Total     
                           -----------   -----------   -----------    -----------    -----------
<S>                          <C>         <C>           <C>            <C>            <C>        
Common Stock Issued For:
  Cash:
    At $.35 Per Share           50,000   $        50   $    17,450    $      --      $    17,500
    At $.40 Per Share          323,983           324       128,471           --          128,795
    At $.50 Per Share          763,881           762       381,174           --          381,936
    At $.60 Per Share           16,667            17         9,983           --           10,000
    At $.70 Per Share            7,143             7         4,993           --            5,000
    At $.80 Per Share           28,750            29        22,971           --           23,000

  Services:
    At $.50 Per Share          295,884           296       147,646           --          147,942

  Commissions:
     At $.35 Per Share          44,614            45           (45)
     At $.40 Per Share          41,993            42           (42)
     At $.50 Per Share          37,936            38           (38)

  Expense:
     At $.35 Per Share           8,888             9         3,099                         3,108
     At $.40 Per Share           9,645            10         3,848                         3,858

  Property and Equipment
      At $.60 Per Share          7,500             8         4,492                         4,500

  Exercise of Options
    Services:
      At $.35 Per Share
        By Related Party       136,301           136        47,569                        47,705

Net Loss                          --            --            --         (805,496)      (805,496)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1997     14,380,900   $    14,381   $ 6,847,723    $(5,508,216)   $ 1,353,888
</TABLE>



                                       F-9

<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998


<TABLE>
<CAPTION>
                                                        Deficit
                                                      Accumulated
                                 Common Stock         Capital Paid      In The
                           -------------------------  In Excess of    Development
                              Shares       Amount       Par Value        Stage          Total     
                           -----------   -----------   -----------    -----------    -----------
<S>                         <C>          <C>           <C>            <C>            <C>        
Common Stock Issued For:
  Cash:
    At $.20 Per Share           10,000   $        10   $     1,990    $      --      $     2,000
    At $.25 Per Share          100,000           100        24,900           --           25,000
    At $.27 Per Share           45,516            46        12,244           --           12,290
    At $.28 Per Share          150,910           151        41,349           --           41,500
    At $.30 Per Share           60,333            60        18,040           --           18,100
    At $.31 Per Share            9,677            10         2,990           --            3,000
    At $.32 Per Share           86,750            87        27,673           --           27,760
    At $.33 Per Share          125,364           125        41,245           --           41,370
    At $.35 Per Share           75,144            75        26,225           --           26,300
    At $.38 Per Share           49,048            49        18,311           --           18,360
    At $.40 Per Share          267,500           268       106,732           --          107,000
    At $.45 Per Share           65,333            65        29,335           --           29,400
    At $.50 Per Share          611,184           610       304,907           --          305,517

Services:
    At $.23 Per Share           48,609            49        11,131           --           11,180

Exercise of Options:
  Services:
     At $.22 Per Share          82,436            82        18,054           --           18,136
     At $.35 Per Share         183,846           184        64,162           --           64,346

Compensation:
     At $.22 Per Share         105,000           105        22,995           --           23,100
     At $.35 Per Share          25,000            25         8,725           --            8,750

Commissions:
     At $.22 Per Share          67,564            68           (68)          --
     At $.35 Per Share         291,028           291          (291)          --

Net Loss                          --            --            --         (807,181)      (807,181)
                           -----------   -----------   -----------    -----------    -----------
Balance - July 31, 1998     16,841,142   $    16,841   $ 7,628,372    $(6,315,397)   $ 1,329,816
                           ===========   ===========   ===========    ===========    ===========
</TABLE>


                                      F-10
<PAGE>



                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                             STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                   For The Period
                                                          For The Year Ended     September 17, 1982
                                                               July 31,             (Inception)
                                                      --------------------------         To
                                                          1998          1997        July 31, 1998
                                                      -----------    ----------- ------------------
<S>                                                   <C>            <C>            <C>         
Cash Flow From Operating Activities:
  Net Loss                                            $  (807,181)   $  (805,496)   $(6,315,397)
  Adjustments to Reconcile Net Loss to
    Net Cash Used By Operating Activities:
      Depreciation                                          5,322          6,350        350,154
      Loss on Write-Off of Investment                        --             --           10,000
      Loss From Joint Venture                                --             --          101,700
      Value of Common Stock Issued For Services           125,512        207,113      1,587,070
      Compensation Portion of Options Exercised              --             --          261,500
      Changes in Operating Assets and Liabilities:
        Decrease in Prepaid Expenses                         --           51,408           --
        (Increase) Decrease in Other Current Assets           792           (769)          (184)
        Increase in Security Deposit                         --             --           (3,667)
        Increase (Decrease) in Accrued Expenses
           and Taxes                                        4,686        (13,896)        60,596
                                                      -----------    -----------    -----------

Net Cash Used By Operating Activities                    (670,869)      (555,290)    (3,948,228)
                                                      -----------    -----------    -----------

Cash Flow From Investing Activities:
  Purchase of Property and Equipment                         --          (10,697)    (1,705,650)
  Investment in Joint Venture                                --             --         (101,700)
  Investment in Privately Held Company                       --             --          (10,000)
                                                      -----------    -----------    -----------

Net Cash Used By Investing Activities                        --          (10,697)    (1,817,350)
                                                      -----------    -----------    -----------
</TABLE>



The accompanying notes are an integral part of the financial statements.

                                      F-11


<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                             STATEMENT OF CASH FLOWS
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                  For The Period
                                                         For The Year Ended     September 17, 1982
                                                              July 31,              (Inception)
                                                     --------------------------         To
                                                        1998           1997        July 31, 1998
                                                     -----------    ----------- ------------------
<S>                                                  <C>            <C>            <C>         
Cash Flow From Financing Activities:
  (Increase) Decrease in Loans Receivable            $    (2,664)   $     2,082    $    (8,490)
  Increase in Loans Payable - Officers                      --             --           18,673
  Repayment of Loans Payable - Officers                     --           (9,673)       (18,673)
  Proceeds From Sale of Common Stock                     657,597        566,231      6,210,655
  Commissions on Sale of Common Stock                       --             --           (5,250)
  Expenses of Initial Public Offering                       --             --         (408,763)
  Purchase of Certificate of Deposit - Restricted           --                          (5,000)
  Purchase of Mining Reclamation Bond                       --             --           (6,000)
                                                     -----------    -----------    -----------

Net Cash Provided By Financing Activities                654,933        558,640      5,777,152
                                                     -----------    -----------    -----------

Increase In Cash and Cash Equivalents                    (15,936)        (7,347)        11,574

Cash and Cash Equivalents - Beginning                     27,510         34,857           --   
                                                     -----------    -----------    -----------

Cash and Cash Equivalents - Ending                   $    11,574    $    27,510    $    11,574
                                                     ===========    ===========    ===========

Supplemental Cash Flow Information:
  Cash Paid For Interest                             $      --      $      --             --   
                                                     ===========    ===========    ===========

  Cash Paid For Income Taxes                         $     1,368    $       688    $    25,483
                                                     ===========    ===========    ===========

Non-Cash Financing Activities:
  Issuances of Common Stock as Commissions
    on Sales of Common Stock                         $   116,724    $    39,912    $   226,421
                                                     ===========    ===========    ===========

  Issuance of Common Stock as Payment for Expenses   $    93,662    $     6,966    $   100,628
                                                     ===========    ===========    ===========

  Issuance of Common Stock as Payment for Property
    and Equipment                                    $      --      $     4,500    $     4,500
                                                     ===========    ===========    ===========
</TABLE>


The accompanying notes are an integral part of the financial statements.

                                      F-12


<PAGE>






                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 1 - Summary of Significant Accounting Policies

     Basis of Presentation

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue as a going  concern.  However,  the Company has incurred
recurring losses through July 31, 1998 aggregating $6,315,397, and has a working
capital  deficiency  at July 31, 1998 of $40,348 that raises  substantial  doubt
about its ability to continue as a going  concern.  As indicated in Note 10, the
Company  is  in  the  process  of  raising  additional  capital  and  financing.
Continuation of the Company is dependent on (1) consummation of the contemplated
financings,   (2)  achieving   sufficiently   profitable   operations   and  (3)
subsequently   maintaining  adequate  financing   arrangements.   The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

     Property and Equipment

     Property and equipment is reported at cost.  It is the Company's  policy to
capitalize  costs  incurred  to improve  and  develop  the  mining  and  milling
property. General and administrative expenses are expensed as incurred.

     Depletion of mine and mill improvements is computed at cost using the units
of  production  method.  The Company has made no provision  for depletion as the
mine  and  mill  is not in the  production  stage.  Provision  is  made  for the
depreciation  of office  furniture and fixtures,  machinery and  equipment,  and
building.  Depreciation  is computed  using both  straight-line  and  accelerate
methods over the estimated useful lives of the related assets.




                                      F-13

<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 1 - Summary of Significant Accounting Policies (Continued)

     Income Taxes

     The Company accounts for income taxes under the asset and liability method.
The  objective of the asset and  liability  method is to establish  deferred tax
assets and  liabilities  for the  temporary  differences  between the  financial
reporting  basis and the tax basis of the Company's  assets and  liabilities  at
enacted tax rates  expected to be in effect  when such  amounts are  realized or
settled.

NOTE 2 - Mining Reclamation Bonds

     This  represents  certificates  of  deposit  that  have been  deposited  as
security for a Mining Reclamation Bond.

NOTE 3 - Loans Receivable

     Included in loans  receivable are unsecured  short-term  revolving loans of
$5,650 and $2,840 paid by the  Company  respectively  to  Franklin  Consolidated
Mining Co., Inc., a publicly  traded  corporation  and South American  Minerals,
Inc. a publicly traded  corporation.  These are non-interest  bearing and due on
demand.





                                      F-14

<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 4 - Property and Equipment

     Property and equipment consists of the following:

     Land                                                        $   24,364
     Building                                                        22,655
     Machinery and Equipment                                        358,230
     Mining Claims and
       Leasehold Improvements                                       106,786
     Mill and Mining Improvements                                 1,192,658
     Office Furniture, Fixtures
       and Equipment                                                    958
                                                                 ----------
                                                                  1,705,651
     Less:  Accumulated Depreciation                                350,154
                                                                 ----------
                                                                 $1,355,497
                                                                 ==========


NOTE 5 - Accrued Expenses and Taxes

     Included in accrued  expenses  and taxes as of July 31,  1997 were  amounts
aggregating $11,923 owed to certain officers and stockholders of the Company for
unpaid salaries. As of July 31, 1998 unpaid salaries were paid in full.

NOTE 6 - Stockholders' Equity

     At various stages in the Company's  development,  shares of stock have been
issued in exchange  for the fair market  value,  as  determined  by the Board of
Directors,  for services  received with a  corresponding  charge to  operations,
property and  equipment or capital paid in excess of par value  depending on the
nature of the services provided.






                                      F-15


<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 6 - Stockholders' Equity (Continued)

     Common Stock Reserved For Issuance

     The following is a table with respect to common stock  reserved for options
as of July 31, 1998:

                                                       Options Outstanding
                                                   --------------------------
                                                   Number of       Price Range
                                                    Shares          Per Share
                                                   --------         ---------

Balance - July 1, 1991                                  -0-         $      --

  Options Granted:
    Services                                        400,000         .10 - .50
    Services - Related Parties                      225,000               .50

  Options Exercised - Related Parties              (100,000)              .50
                                                   --------         ---------
Outstanding - July 31, 1992                         525,000         .10 - .50

  Options Granted:
    Services                                        200,000               .50
                                                   --------         ---------
Outstanding - July 31, 1993                         725,000         .10 - .50

  Options Granted:
    Services                                        310,000               .50
    Services - Related Parties                      350,000               .50
                                                                          
  Exercised:                                                              
    Services                                        (35,000)              .50
    Services - Related Parties                     (150,000)              .50
                                                                     
  Expired:                                         (525,000)        .10 - .50
                                                   --------         ---------

Outstanding - July 31, 1994                         675,000               .50
                                                                          
  Exercised:                                                              
    Services                                        (35,000)              .50
    Services - Related Parties                     (350,000)              .50
                                                   --------         ---------

Outstanding - July 31, 1995                         290,000               .50




                                      F-16

<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 6 - Stockholders' Equity (Continued)

     Common Stock Reserved For Issuance

     The following is a table with respect to common stock  reserved for options
as of July 31, 1998:

                                                        Options Outstanding
                                                   ---------------------------
                                                    Number of       Price Range
                                                     Shares          Per Share
                                                   ----------        ---------
  Options Granted:
      Services - Related Parties                      600,000         $    .35

  Exercised:
      Cash - Related Parties                          (17,500)             .40
      Services                                        (95,000)             .50
      Services -Related Parties                      (202,500)             .35

Expired:                                             (165,000)             .50
                                                   ----------         --------

Outstanding - July 31, 1996                           410,000          .35-.50

  Options Granted
      Services - Related Party                      1,545,000              .35
      Services                                         10,000              .35

  Exercised
      Service - Related Party                        (101,730)             .35
      Expired                                         (30,000)             .35
                                                   ----------         --------

Outstanding July 31, 1997                           1,833,270              .35

Options Granted:
      Services - Related Parties                      610,000              .22
       Services                                       755,000          .22-.40

  Exercised:
      Services                                       (720,000)         .22-.35
                                                   ----------         --------

Outstanding - July 31, 1998                         2,478,270         $.10-.40
                                                   ==========         ========



                                      F-17

<PAGE>


                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 6 - Stockholders' Equity (Continued)

     Authorized Common Stock

     In September  1993 the Company's  shareholders  approved an increase in the
authorized common stock from 100,000,000 shares to 150,000,000 shares.

     Effective  April 11,  1997 the Company  underwent a 1 for 10 reverse  split
with all fractions being rounded up into new common stock.

     All  references to common stock is restated to reflect the 1 for 10 reverse
split.

NOTE 7 - Income Taxes

     For income tax purposes,  the Company has a net operating loss carryforward
at July 31, 1998 of  approximately  $5,100,000  beginning  to expire at July 31,
2001 if not offset against future federal taxable income.

     Pursuant to FASB 109, the Company has elected to take a 100% reserve on the
deferred  tax  asset  arising  from  the  net  operating  loss   $1,734,000  and
accordingly there is no cumulative effect adjustment or current year tax benefit
recorded.

NOTE 8 - Commitments and Contingencies

     From time to time,  the  Company  may be named in legal  actions  which are
incidential  to the  industry  in which the  Company  operates.  Currently,  the
Company is not a party to any legal proceedings.



                                      F-18

<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998


NOTE 9 - Refining Contract

     The Company has entered into an agreement with ASARCO  Incorporated for the
sale and  refining of lead  concentrates  produced  from the  Company's  mine in
Colorado. The Agreement provides that the Company may ship metallic materials in
lots of 200 - 300 tons to ASARCO's smelter in East Helena,  Montana. ASARCO will
take delivery of the material,  perform the smelting  operations and pay for the
metals based on the London Metals Exchange less certain  deductions for expenses
of smelting and adjustment for excess impurities, including water. The period of
the agreement  commenced on September 1, 1995 through and  including  August 31,
1997 and  continues  thereafter  subject  to  cancellation  on sixty  (60) days'
written notice by either party;  however,  the agreement shall not extend beyond
June 30, 2000.

NOTE 10 - Liquidity and Going Concern Uncertainty

     The Company has incurred recurring losses amounting to $6,315,397 and has a
working  capital  deficiency  of $40,348 at July 31,  1998.  These  events raise
substantial doubt about the Company's ability to continue as a going concern.

     Specific  plans  to  obtain  financing  for a full  scale  mining  and mill
operation may include a combination of one or more of the following:

     a. Private placements of the Company's securities to institutions,  private
individuals,  mining companies, and/or investment groups. During the fiscal year
ended July 31, 1998 the Company raised approximately  $657,597 through the sales
of common stock to  investors,  which enabled the Company to complete the Hunter
Shaft, test the mill and do long-hole drilling and core drilling.





                                      F-19


<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1998



NOTE 10 - Liquidity and Going Concern Uncertainty (Continued)

     b. A  working  arrangement  with a mining  company  pursuant  to which  the
Company  would  mine and the other  company  would  mill,  smelt and  market the
products.  Under these  conditions,  the Company's cost would be concentrated on
the mining  effort  only.  The Company has  negotiated  such an  agreement.  The
agreement  ran for an  initial  two year term.  Since  September  1,  1997,  the
agreement  is   terminable   by  either  party  on  sixty  (60)  days'   notice.
Notwithstanding  the foregoing,  the agreement  would not extend beyond June 30,
2000. The Company would deliver  metallic  minerals to the mining company's mill
site six miles  southeast  of  Leadville,  Colorado.  The price for the material
would be based  upon the  London  Metals  Exchange  market  price  less  certain
deductions for treatment and impurities on the date of delivery.

     Assuming  that the Company is able to obtain  funds from one or more of the
above  sources,  planned  activities  over the next twelve months should include
completing raise to connect levels 5 and 7, commence  exploration tunnel to Penn
Group of minerals,  continue  long-hole  drilling on B-Zone,  level 6 and, Block
427, level 7, and to mine and mill. During the fiscal 1999, the Company needs to
raise additional capital in order to complete these projects.

     There is no assurance  whatsoever that any of the Company's  proposed plans
to raise  capital and  otherwise  fund  operations  will prove  successful.  The
Company's  ability to continue as a going concern is dependent  upon its ability
to obtain sufficient  funding as discussed above and its inability to do so will
delay or cease the Company's planned operations as discussed above.




                                      F-20